HO_MB3e_IM_Ch12

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1、Chapter12 FinancialCrisesandFinancialRegulation  175Chapter12FinancialCrisesandFinancialRegulationn BriefChapterSummaryandLearningObjectives12.1TheOriginsofFinancialCrises(pages389–397)Explainwhatfinancialcrisesareandwhatcausesthem.·Becausebanksborrowfromdep

2、ositorsshorttermandlendlongtermtohouseholdsandfirms,bankshaveamaturitymismatchwiththematurityoftheirliabilitiesexceedingthematurityoftheirassets.Thismismatchcreatesliquidityrisk.·Liquidityriskisaparticularproblemforbanksifthegovernmentdoesnotprovideinsurance

3、fordepositsandthereisnocentralbank.·Governmentshavetwomainwaystheycanattempttoavoidbankpanics:(1)Acentralbankcanactasalenderoflastresort,and(2)thegovernmentcaninsurebankdeposits.·Abankpaniccanleadtodeclinesinproductionandemployment,eithercausingarecessionorm

4、akinganexistingrecessionworse.·Thoughtherearesomebenefitstohavingafixedexchangerate,peggingexchangeratescancauseproblems,particularlyifthepeggedexchangerateendsupsubstantiallyabovetheequilibriumratethatwouldprevailintheabsenceofthepeg.·Asovereigndebtcrisisoc

5、curswhenacountryhasdifficultymakinginterestorprincipalpaymentsonitsbonds,orwheninvestorsexpectacountrytohavethisdifficultyinthefuture.12.2TheFinancialCrisisoftheGreatDepression(pages397–403)DescribethekeyelementsofthefinancialcrisisthatoccurredduringtheGreat

6、Depression.·AlthoughtheGreatDepressionbeganinresponsetoanincreaseininterestratesin1929,severalfactorsincreasedtheseverityofthedownturnbetweenthefallof1929tothefallof1930,includingastockmarketcrashinOctober1929andthepassageoftheSmoot-HawleyTariffActinJune1930

7、.·Manyeconomistsbelievethattheseriesofbankpanicsthatbeganinthefallof1930greatlycontributedtothelengthandseverityoftheGreatDepression.·TheFederalReserve,whichCongressestablishedin1913toendbankpanics,didnotintervenetostabilizethebankingsystem.12.3TheFinancialC

8、risisof2007–2009(pages403–406)Describewhatcausedthefinancialcrisisof2007–2009.·Thefinancialcrisisof2007–2009beganwiththeburstingofahousingbubble,whichledtoacreditcrunch.·ThecollapseofLehmanBroth